The RBA noted that it is “unusual” that property prices are falling while interest rates are at historic lows, and unemployment figures are also low.

The price drops have been driven by weaker demand in conjunction with increasing supply, the RBA said in its latest Financial Stability Review.

Across the board, housing prices in Australia are now 7 per cent below their peak two years ago.

This is set to continue. The surge in supply of properties in Melbourne and Sydney, specifically apartments, will continue to push prices down.

These patterns could see a spike in the incidence of negative equity, the RBA said.

“The prevalence of negative housing equity is low, but substantially larger price falls would see a large share of households’ housing equity eroded or even turn negative,” the RBA said. 

When will house prices go up?

Economic and property experts are beginning to predict the market will bottom out by the end of the year, with price recovery beginning into next year. 

Some, like accounting and advisory giant KPMG, believe Melbourne will recover at a faster pace than Sydney, based on supply considerations. 

You can read KPMG's in-depth forecast here.